Harrisburg’s bankruptcy

Money up in smoke

An incinerator brings Pennsylvania’s capital close to fiscal ruin

THE city is beautiful. Some of its architecture is spectacular; the dome of the state capitol resembles a Vatican basilica. The Susquehanna river flows impressively alongside Front Street. But Pennsylvania's capital has hellish financial problems. Because of a crippling $300m debt connected to the city-owned rubbish incinerator, Harrisburg faces bankruptcy—and may well be taken over by the state.

For over a year the mayor and the seven-member city council have wrangled over the debt. The city council has already rejected at least three fiscal plans from the mayor. Then, on October 12th, the council filed for Chapter 9 in a federal bankruptcy court, which means that some of the city's debts may be forgiven. (It is not entirely clear that the council has the power to do this and a judge will decide on the legality of the filing on November 23rd.) Some of the councillors believe that bankruptcy will give them more control, especially over the fate of the city's assets.

But state legislators, fed up with the city's failure to enact a fiscal plan and worried lest it impose an unwelcome commuter tax, have intervened. The two chambers overwhelmingly passed a bipartisan-supported measure authorising Tom Corbett, Pennsylvania's governor, to declare a fiscal emergency and appoint a receiver. Under state law, such a receiver can implement a fiscal-recovery plan when a city needs one but fails to produce it. Assistance is then provided to financially distressed cities; 19 other cities in Pennsylvania, including Pittsburgh and Scranton, already operate under it. The programme has proved helpful, though difficult to get out of.

Mr Corbett signed the bill on October 20th and, four days later, declared a fiscal emergency in Harrisburg. City officials now have 30 days (ending, as it happens, the same day as the bankruptcy ruling) to adopt a state-approved financial recovery plan. If they fail, the governor will appoint a receiver with authority to sell city assets and approve city contracts.

Chris Hoene, of the National League of Cities, points out that Harrisburg's bankruptcy is not a harbinger of a wider trend. Although New York state in January took control of the finances of Long Island's Nassau County, and Rhode Island's Central Falls filed for bankruptcy in August, city bankruptcies “are still very rare despite predictions to the contrary.”

Curiously, unlike other distressed cities, Harrisburg has an unemployment rate that is lower than the state's. Indeed, there are more jobs in Harrisburg than there are residents. And were it not for the incinerator debt (mostly incurred by the effort to modernise it), the city's financial problems would be manageable. The incinerator, which was once supposed to pay for itself, will probably be sold to pay for some of the debt, though the city controller is loth to lose any potential money-maker. The city-owned parking garages will probably be leased too. An investigation is under way to examine how and why the debt got out of hand.

“The whole thing is an embarrassment,” says Charlie Gerow of Quantum Communications, a political consultancy. But embarrassing, bizarre and wasteful ventures are nothing new for Harrisburg. Its previous mayor once tried to open a Wild West Museum (in a state not known for its cowboys), and used city money to buy the exhibits.